LC014: Skin in the game: Building your prototype

launchpeer - June 14, 2018 - 0 comments

Today’s question:

Today’s question comes from Ehud. His question goes back to a classic chicken and egg problem. It deals with needing money to build a product but feeling as though he needs a product before he can raise money.

Jake’s answer:

So how can you get over that hurdle?

Firstly, I want to be clear that you don’t need a prototype in order to raise money. We have a prototype service at LaunchPeer and we’ve seen startups that use that service be able to raise funds 3-6 months after completing that prototype. They use that prototype to get a clear picture of what the product looks like and exactly how it’s going to work to provide some leverage during the pitch process with investors.

However, the things that happen during the prototype process aren’t actually that expensive to do. Most of what happens during the process is about clearly defining what your product is and how it will work rather than actually building the product itself. You really just want to be development ready by the time you raise capital.

The pieces of the prototype process include:

Wireframes (UX)

Basic UI design

Workflows

Technical specifications

These are all things that you can do yourself without a lot of outside investment.

Many people in the startup community believe that you shouldn’t have to spend your own money to create a product prototype but I’m of the opinion that by spending your own money to create your prototype you show investors that you have skin in the game and truly believe in your product and have confidence that it will succeed.

It’s not just about the idea

Remember, investors aren’t just investing in a product or idea, they are investing in the founder. Anyone can create a pitch deck with a solid idea, but it doesn’t show the type of commitment that investors want to see when they are looking to fund a startup.

The prototype process and personal investment also works in the B2B space when you’re trying to raise money by selling your product to large, enterprise businesses. Putting the time into creating a prototype that shows you understand what your customer’s needs are is a critical part of the sales process in the early stages.

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